Digital Battlefront in the Tax Wars

15 Pages Posted: 14 Nov 2018 Last revised: 1 Jan 2019

See all articles by Ruth Mason

Ruth Mason

University of Virginia School of Law

Leopoldo Parada

University of Turin - Department of Management

Date Written: November 6, 2018


We argue that the high revenue triggers in proposed digital taxes — including the recent Franco-German proposal for a digital advertising tax — may violate state-aid law and prohibitions on nationality discrimination in the Treaty on the Functioning of the European Union.

We explain how both digital taxes adopted by particular member states and digital taxes as an EU directive may discriminate against the EU subsidiaries of US-headquartered tech companies.

Our arguments depend critically on two features of proposed digital taxes: (a) their high revenue triggers, which ensure that only very large, and therefore disproportionately foreign, companies pay digital taxes; and (b) their narrow scope, which ensures that only companies operating in specific
disfavored sectors face taxation.

To the extent that any digital tax proposal (whether unilateral or EU) ends up sharing these features, it would face the same challenges. If those flaws were corrected, digital taxes
would be less discriminatory, but also less politically palatable.

Keywords: digital services tax, DST, digital tax, EU law, digital PE, permanent establishment, tech tax, web tax, google tax

JEL Classification: K34

Suggested Citation

Mason, Ruth and Parada, Leopoldo, Digital Battlefront in the Tax Wars (November 6, 2018). 92 Tax Notes International 1183 (2018).. Available at SSRN:

Ruth Mason (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Leopoldo Parada

University of Turin - Department of Management ( email ) Unione Sovietica, 218 bis
Turin, Turin 10100


Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics